What is a freight broker bond?
Freight broker bonds (also known as BMC 84 bonds or ICC bonds) are legally binding agreements between three parties: freight brokers, the Federal Motor Carrier Safety Administration (FMCSA), and a surety company.
The FMCSA is the Obligee and establishes the obligations that the Principal (the freight broker) must follow. The surety (also called bonding company) issues the bond guaranteeing the performance of the broker. Some states require their own freight broker bonds in addition to the bond required by the FMCSA.
Why do you need a freight broker bond?
Freight broker bonds are required to be eligible for a freight broker license to operate as a freight broker or freight forwarder in the United States. If a broker chooses not to post a surety bond, they have the option to place the total value of the bond into a trust fund by filing Form BMC-85. This option is less attractive to newer freight brokers as it requires paying the full value of the bond upfront instead of paying a premium.
When the surety company issues the bond, they are providing the FMCSA a guarantee that the shippers and motor carriers of a licensed broker will receive payment for financial losses resulting from a violation of the statutes and regulations required by the freight broker license.
If the freight broker fails to meet the obligations set out by the FMCSA, the surety will pay out damages up to the bond amount. The broker is liable for the losses and is legally required to reimburse the surety company for any damages paid under the bond.
How much does a freight broker bond cost?
The total bond amount for a freight broker surety bond is $75,000. The surety company determines your premium rate, which is the percentage of the total bond amount you pay as the premium.
During the application process, the surety company evaluates your credit score, financial strength, industry experience, and licensing history. Applicants with good credit generally receive the lowest rates, however, bad credit will not prevent you from securing a freight broker bond. EZ Surety can still offer competitive rates to individuals with low credit scores or other financial issues. EZ Surety has issued freight broker bonds with premiums as low as 1.25% ($938).